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Senator Percy. Mr. Secretary, I will start with the premise that I do not think there is any doubt that under certain conditions the President of the United States has the authority to impound funds. This has historical precedence and it has been done by Presidents for many, many years. Certainly during times of war you do not have too much question about it.

Why do you suppose that considering there is precedent for it, there is more a hue and cry at this particular time when President Nixon has done it than ever before in my recollection? There were rumblings under President Johnson when highway funds were impoundedGovernors came down—but now this seems to have Congress aroused, special committees established pressure groups pouring into Washington.

What is the nature of this impoundment that has been so different than the precedents that have been enumerated by the administration in its testimony before this committee?

Secretary Burz. I think the Chief difference, Senator, is that this time the President had the courage to substantially move in on programs that had a lot of political overtones in back of them, perhaps, as I said awhile ago, that have had low executive branch priority for years through half a dozen administrations, yet they have political popularity.

I was interested last week, in the Agriculture Committee where I was testifying before Senator Talmadge's committee on this very thing, to note the list of witnesses that followed me. As I looked down through the list of witnesses that followed me, practically all were opposed to the cuts being made. I saw there the National Limestone Institute, National Association of Drainage Contractors, National Association of Irrigation Contractors, National Association of Land Developers, National Association of Homebuilders, and I thought, these are boys who farm the farmers. They are the ones in here making the noise about this.

We have trade associations here in Washington that can reach 3,000 people in the country, and generate 10,000 letters in this town in a week. We have touched exposed nerves, and I think that makes the essential difference now.

Senator PERCY. The chairman mentioned price support programs. How much, for instance, do we put into price support of tobacco?

Secretary Burz. Not very much in recent years. We have had a 5 cent per pound export subsidy on tobacco, and approximately 45 to 50 percent of our tobacco has been exported. That has cost us in the neighborhood of $26 million a year.

Four or 5 years ago we got in a difficult surplus situation, but the Tobacco Stabilization Corp. has worked that out with very tight production controls. Tobacco has not been one of our expensive support programs.

Senator PERCY. But the total budgetary impact would be how much money?

Secretary Burz. This year?
Senator PERCY. In 1974.

Secretary Butz. In 1974, the outlays are estimated at about $17 million on old crop tobacco exports. This year we have discontinued the export subsidy on new crop tobacco. It would be virtually zero cost on the new crop. CCC will make money on tobacco in 1973. That is an unusual situation.

Senator PERCY. In looking at places to get money, to help reduce the pressure on the budget, how hard a look was taken at the price support program? In principle, I believe this is something, over a period of years, I had hoped we would try to wean ourselves away from. There is a reduction reflected in the fiscal 1974 budget, the largest probable drop in that program that we have had for a number of years. How much more do you think might be available if you cut deeply in the area, and how far could you cut, and what factors were taken into account in the political pressures that would result if heavy cuts were made in that program?

Secretary Burz. Senator, the cuts made in next year's budget are in large part the result of bringing substantial acreage back into production in 1973.

We are freeing for production, in 1973, some 40 million acres that had been held out in 1972. As you do that, automatically the payments decrease to some extent. On the other hand, there were certain built-in costs in the thing that were beyond our power to reduce. We are mandated, for example, to pay not less than 15 cents a pound on cotton production. In the case of wheat produced for domestic consumption, we pay the difference between the average price the first 5 months of the market year and parity.

On feed grains, we were mandated to pay certain minimums. Hopefully, we will take a look at some of those requirements in the new legislation coming up. But even so, we are reducing our direct payments by something like $11,2 billion in 1974 over fiscal year 1973.

Senator Percy. Secretary Butz, could you give us a list—as other witnesses have—of the conditions that you feel permit the President to impound funds within the constitutional authority that he has? What set of circumstances must, and should exist, before he does this?

Secretary Burz. We would be delighted to supply such a list.

Senator PERCY. Can you give us, offhand, the circumstances that justify in your mind the present nature of this inquiry?

Secretary Burz. I think, to recap what I have already said, it is a question of facing a budget ceiling--a debt ceiling here-with expenditures that either have necessitated an increase in revenue or an increase in the ceiling-in the ceiling itself. That was the circumstance that the President faced here and took the course of reducing expenditures.

Senator Percy. Does it make any difference in your judgment as to whether the President impounds the funds permanently and thus destroys the program, or does so on a temporary basis in order to break some sort of condition which he feels is a crisis or emergency that would cause that action to take place?

Secretary Burz. Yes, sir; I think you have distinguished two sets of circumstances that should be differentiated.

The President took this drastic action for the remainder of fiscal 1973. He has submitted the 1974 budget to the Congress, which continues on his recommendation some of the economies that he imposed when he impounded funds in 1973.

The Congress could pass its budget this year and have a chance to pass on those recommendations.

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Senator Percy. By its action in the REAP program, the fundamental nature of the program has been changed. Without getting into the rightness or wrongness of that particular action, has the administration ever proposed legislation and fought for legislation that would have done it through the legislative process rather than impoundment process?

Secretary Butz. Well, we never had legislation on the exact practices that should be carried out in REAP. That was a matter of administrative decision. There has been language written in the report on the appropriation bill, especially on the House side, about changes occurring in practices under the REAP program. Last year, there was some provision made for sort of a grandfather clause that any practice that was done in the counties in 1970 should be continued at the option of the counties.

The adıninistration has been trying to minimize those practices in REAP that were essentially production increasing, and to encourage practices that were essentially pollution-control practices.

Senator PERCY. If a set of emergency conditions or crises conditions do not exist and cannot be used as the justification for changing programs— let's say we had a balanced budget, no fiscal crisis, we are not at war-do you feel the President has, under the present constitutional powers, the right to change at will the programs enacted by Congress?

Secretary Butz. Well, now, you are asking me a constitutional question. Again, I go back on precedents.

Presidents have done that when the country was not at war, when there was no fiscal crisis in the budget. At that time, as far as I am aware, the Congress did not challenge the right of the President to do that.

Senator PERCY. Do you feel the changes that were brought about by you, and your participation in obviously requesting the President to participate in contributing toward a budget cut, would bring us more in line with the maximum overall figure he had in mind? Was there adequate consultation with the Congress on this? Were congressional leaders in the field in which you have been interested consulted as to where-if they were given the problem--they might see fit to make cuts?

Secretary BUTZ. I think it is not fair to say they were consulted. I had come and talked to the leaders of our Agriculture Committee just prior to the announcements of the cuts, but it is not fair to say they were consulted.

Senator PERCY. I think that covers the principal questions that I had of you. I must say in talking with many farmers in my own State I have to inquire in what some of the programs were moneys required for them now, what the rate of interest was we were paying at the time the 2-percent loan program was put in as against the cost of that money the Government now

Secretary Butz. Incidentally, 1.96 at that time, was the average cost of money to the Government.

Senator PERCY. There is a vast difference now.

One thing that I would like amplification on; there was a comment made either in the Presidential message or in a statement that you made, I have forgotten which.

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Secretary BUTZ. There is a difference with the two.

Senator PERCY. Well, in this program, both of you speak with authority.

But above the fact that, though the program is labeled a Rural Electrification Administration program, that funds are asked for country clubs and other activities.

Secretary Butz. Dilettante.

Senator PERCY. Subsidized funds being required for the expenditures of that type would be a little ludicrous in the light of our present crisis. Are these isolated cases, or is this a sizable proportion of funds that are used for something other than justification for programs such as providing telephones, electricity to rural communities that we all say they ought to have some assistance and help on?

Secretary Burz. Yes, sir; REA has done a tremendous job of bringing electricity to rural America. When it came in in the midthirties something like 11 percent of our farms had electricity. Now over 48 percent have electricity.

Of the 7-million meters on REA lines right now, only 20 percent are farm meters. 80 percent are nonfarm meters. Some of them are country clubs and dilettantes, whatever a dilettante is. The great bulk of them, however, are rural residents, retired people living outside of the cities. I think it is wonderful that the REA has brought electricity to country clubs which rural people can enjoy.

The only point I make is, they should bear their own weight.

Senator PERCY (presiding). These hearings will be recessed for 10 minutes during a rollcall vote during which time Senator Ervin and Senator Chiles want to return for some more questions.

(Short recess taken.)

Senator CHILEs. Mr. Secretary, I appreciate your letting us inconvenience way. We had a vote and I think it is still going on so we may be getting some other members back.

I will pick up until we get some other members in.

I wanted to get your comments, Mr. Secretary, on the copy of a letter I received that our State director, Claude Green, State Director of the Farmers Home Administration in Florida, sent out on July 10 of 1972. He sent this out to a number of builders on July 10:

DEAR MR. HODGES : We in Farmers Home Administration are pleased to announce we have just completed a most successful year in the rural housing program in Florida. There were 1,955 loans made last fiscal year in the amount of $28,440,140 to enable individuals to purchase or build new homes. Thirty-nine rare loans were made in the amount of $62,000, one rental housing loan was made for $18,350, two site loans in the amount of $123,450 were made, two labor housing loans in grants totaling $3,348,222 were also made. This makes a total of about $32 million.

Plans have been made to more than double the production this year. Estimated numbers of loans to accomplish this have been given to each county supervisor. We need and solicit your active support and cooperation in the tremendous expansion of our rural housing program.

Please accept this as your invitation to attend and participate in a meeting to be held at the following time and place. The meeting will be open to the public and feel free to invite or bring a friend.

Based on this kind of letter, the particular builder that I talked with recently took it at face value and with this assurance that the program was going to be more than doubled, he borrowed money, he signed performance bonds, he began to purchase land that he could de

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velop, he began to try to carry out what was set forth in this letter. I had a hard time explaining to him how again a program that is passed by the Congress, he receives this kind of letter from the Farmers Home Administration as to what is going to be the program, and suddenly he is told that as of a particular date it is all cutoff, anything he has already okayed right then is fine, but anything else is gone.

How do we expect government to kind of operate under that kind of basis?

Secretary Butz. I presume, Senator, any time you cut off a program or substantially curtail it, somebody gets hurt. I have the figures here.

Senator Chiles. Now, Mr. Secretary, before you get to the figures, you say any time you cutoff a program.

Secretary Butz. Any time you make any program changes on ongoing programs, somebody gets caught in the middle of it. By the same token, if we substantially expand it, and had the foresight to have gotten in, I could be doing this too.

Senator Chiles. What do you think an individual or citizen should be able to rely on? Should he be able to rely on a law passed by the Congress and a letter from the State Director of the FHA which would be the administration representative?

Secretary Butz. That letter was dated in June or July?
Senator CHILES. July 10.

Secretary Burz. Last July 10 and for 6 months, up until December 29 when this cutoff date came, for 512 months the program had gone forward like that. As I said awhile ago, there was enough momentum back of it. It will continue going forward for a while. We estimate that in fiscal 1973 we are going to put out in housing loans $2.03 billion, and in fiscal 1974 $1.14 billion because of the momentum in the program.

What is the pipeline? I presume individual builders will have gone out and made commitments for building sites and will not yet have the firm commitments from FHA and they may have to go and do their construction on a nonsubsidized basis, and money is not available on a nonsubsidized basis to do that.

Senator Chiles. For these low-cost homes, do you think he is going to be able to find the funds for that? That was one of the reasons we were trying to work in rural development, was it not, trying to set up funds because it was not available under ordinary conditions? Secretary Butz. That is correct.

Again we come back to my initial philosophy we had to curtail some place here because we were bumping into a debt ceiling if we did not curtail expenditures.

Senator CHILES. I noticed that your General Counsel, I do not guess

Secretary Butz. Jack Knebel.
Senator CHILES. That is not Edmund M. Shulman?
Secretary Burz. No; he is retired.
Mr. Knebel became our General Counsel 3 weeks ago.

Senator Cuiles. We are using his opinion now to answer the legal ramifications, as I understand it.

Secretary BUTZ. He is yours.
Senator Chiles. I say Mr. Shulman, we are using his opinion.
Secretary Butz. Yes, sir; that is correct.

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